E-invoicing and its applicability with illustration

What is e-invoicing?

e-invoicing refers as per Rule 48(4) of CGST Rules, notified class of registered persons have to prepare invoice by uploading specified particulars of invoice (in FORM GST INV-01) on Invoice Registration Portal (IRP) and obtain an Invoice Reference Number (IRN)

Notified persons: A registered person, other than an SEZ unit*, Insurance Company, banking company, financial institution including non-banking financial institution, GTA, supplier of passenger transportation service, supplier of services by way of admission to exhibition of cinematograph films in multiplex screens, whose aggregate turnover in any preceding financial year from 2017-18 onwards exceeds INR 500 crores [100 crores w.e.f. 01.01.2021] would be required to prepare invoice and other documents prescribed under sub-rule (4) of rule 48 in respect of the supply of goods or services or both to a registered person or for Exports.

[Ref – 13/2020 CT dt. 21/03/2020, 70/2020 CT dt. 30/09/2020 and 88/2020 CT dt 10/11/2020] 

Note:

• SEZ unit includes Free Trade & Warehousing Zones (FTWZ) consequently exempt from E-invoicing
• SEZ Developers are not exempted from E-invoicing therefore they need to follow e-invoicing procedure
• E-invoicing is not applicable in case of self-invoice u/s 31(3)(f) i.e. invoice issued by recipient on behalf of unregistered vendor for enabling ITC to him when recipient is paying tax under RCM
• e-invoicing is not applicable to invoices issued by Input Service Distributor (ISD)
• Financial/commercial credit notes i.e. without GST is not required to reported in e-invoicing, only the credit and debit notes issued under Section 34 of CGST/SGST Act needs to be reported.

The above amendment provides that in any of the preceding FY from 2017-18 if turnover exceeds INR 500 crores [100 crores w.e.f. 01.01.2021] then taxpayers would be required to raise E-invoices.

This condition has to be seen every year i.e. Ideally at the start of every April of FY for applicability

Once E-invoicing is applicable then it would be applicable for all FYs thereafter and there is no escape from this

Illustration for your better understanding

Applicability of E-invoicing threshold 500 crores till 31.12.2020 thereafter 100 crores

Scenario - 1

^# As in previous FY 2020-21 turnover was more than 100 crs

Why e-invoicing? ‘e-invoicing’ facilitates exchange of the invoice document (structured invoice data) between a supplier and a buyer in an integrated electronic format by way of standard e-invoice schema (INV-01) through looping the government authorities i.e. invoicing portal to keep a check on suspicious taxpayers

Process flow for E-invoicing:

• Registered persons would continue to create their GST invoices on their own Accounting/Billing/ERP Systems.
• These invoices will now be reported to ‘Invoice Registration Portal (IRP)’.
• IRP returns the e-invoice with a unique ‘Invoice Reference Number (IRN)’ after digitally signing the e-invoice and adding a QR Code.
• The invoice can be issued to the receiver (along with QR Code).
• A GST invoice will be valid only with a valid IRN.

Whether e -invoice for businesses beneficial?

• e-invoice has many advantages for businesses such as Auto-reporting of invoices into GST return, auto-generation of e-way bill (where required).
• e-invoicing will also facilitate standardisation and inter-operability leading to reduction of disputes among transacting parties, improve payment cycles, reduction of processing costs and thereby greatly improving overall business efficiency.
• However, the cost of implementing the e-invoicing into the ERP systems etc. would involve huge cost may come up to 10-15 lakhs p.a. as per market standards

What businesses need to do, to be e -invoice ready?

• Businesses will continue to issue invoices as they are doing now.
• Additional person to hire who could look after into these compliances as this could be time consuming at the starting of implementation else could be outsourced which would again cost businesses
• Upgradation of ERP systems in line with schema of e-invoicing, IRP and IRN

Whether amendments could be made in e-invoices once raised for which IRN has already been generated?

• Amendments are not allowed on IRP once raised it cannot be changed/amended, however one could cancel the same within 24 hours where 24 hours are lapsed then the taxpayer do not have any other option and need to proceed with the same
• Further when filing GSTR-1 taxpayer could amend the same in GST portal
• Such above situation would result into differences between GST portal and IRP and same would be flagged and reported to concerned jurisdictional officer

Whether e-invoicing is applicable for invoices between two different GSTINs under same PAN [such as branches of co located in different States]?

e-invoicing is applicable to such distinct person having different GSTINs but same PAN and there is no exception given to them.

How to disclosed TCS under Income Tax 1961 collected in invoice raised in ERP on which GST is not levied as TCS is interim levy and not tax?

• In e-invoice schema, there is particular column for TCS collected by suppliers under Income Tax Act, 1961.
• One could enter such details in field “other charges (Invoice Level)”
• It could be noted that e-invoicing requires details w.r.t disclosed in GST Tax invoice other details could be added when issuing final to recipient.

How to check whether a particular supplier is supposed to issue an e -invoice?

As FAQs release by E-invoicing portal it has clarified as

• The taxpayer needs to ensure applicability of E-invoicing r/w rule 48(4)
• One can search the status of enablement of a GSTIN on e-invoice Portal https://einvoice1.gst.gov.in/Others/EinvEnabled
• The status of enablement of GSTIN is based on GSTR-3B reported turnover
• However, it has to be noted that enablement status on e-invoice portal doesn’t mean that the taxpayer is supposed to do e-invoicing. Taxpayers need to check applicability on actual turnover - As there could be instances that turnover was excess reported in returns etc.in such case actual needs to be seen rather than GSTR-3B reported data.
• This listing of GSTINs is solely based on the turnover of GSTR-3B as reported to GST System. It may contain exempt entities or those for whom e-invoicing is not applicable for some other reason. So, it may be noted that enablement status on e-invoice portal doesn’t mean that the taxpayer is supposed to do e-invoicing. If e-invoicing is not applicable to a taxpayer, they need not be concerned about the enablement status and may ignore it. This information will be eventually made available through “Search Taxpayer” / “Know Your Supplier” Sections on GST portal also

The above said article have been published on Taxguru.in

https://taxguru.in/goods-and-service-tax/e-invoicing-applicability-illustration.html

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